By Muluken Yewondwossen
The Ministry of Industry (MoI) admits to being aware of the difficulties that the local metal sector has had to endure at the hand of the illegal import of finished products. Members of the Ethiopian Association of Basic Metals and Engineering Industries (EABMEI) asserted during the organization’s general assembly on Thursday, November 9, that the importation of various metal commodities with legal covering and almost no customs charge has been endangering the local industry.
Members stated that the revocation of the circular issued by the previous Prime Minister to prohibit the reckless import of completed metal goods has created an impact on local producers, who have constructed a five-fold production capacity in opposition to local demand.
A representative of the MoI stated during the general assembly that his office has been aware of the concerns expressed by manufacturers, noting that, “We have seen activities that are damaging the sector and the challenges that the sector has faced visibly. A portion of the issues arise from policy makers with lack of understanding, which might be resolved if the association worked hard in coordination with the appropriate government agencies.”
“We are aware that the local metal sector can produce more than the region’s need locally and may export goods outside. Since there is enough capacity locally, MoI does not promote the import of commodities,” he explained, adding, “In order to overcome obstacles, the industry should be helped in a structured and polite manner.”
Another official from the same ministry stated that the nation would profit from having access to materials that would support domestic manufacturing rather than importing completed items.
The metal business has been severely impacted in recent months by illegal activity and the use of legal paperwork to import massive quantities of metal goods.
“Rebar and sheet metal are imported via a variety of illicit means and under legal schemes,” said Solomon Mulugeta, General Manager of EABMEI.
He noted that despite EABMEI’s expressing concern for various government agencies, concerning information regarding criminal conduct is still being sent to the association. Members of the association that Capital reached out to expressed that nearly entirely illegally imported goods are sold for far less than what local producers actually have to pay for their production expenses.
Manufacturers, including foreign direct investments (FDIs), expressed dissatisfaction at the press conference that was held during the general assembly, claiming that they came to the nation or invested in the industry because of government’s backing and the rule of law.
The steel industry has always been a vital and growth-engine sector, and Dharmesh Lakhani, Business Head at Abyssinia Group of Industries, one of the largest FID invested in the steel industry, recalled that it is of utmost importance for any country to begin industrialization and move towards the growth path.
“Since Abyssinia and other firms have been operating here for the past 20 years, we have produced a lot of tax revenue and responsibilities in addition to creating a large number of employment opportunities. We wish to go with the expansion in a way that is right for the nation and its citizens,” Dharmesh highlighted.
“From the government’s perspective, we would like to see that this is resolved logically. I would say that a small portion of vendors have imposed very critical problems that are raised at the moment and we would like to address it as soon as possible,” he stated at the press conference.
“We have released a complaint regarding unlawful imports, illicit items, and incorrect product pricing. For the sake of the industry, we will, of course, see to it that a solution is found as quickly as possible,” he said, adding, “We would like to see the nation find a solution rather than face a major issue that would affect them all.”
Managing Director of Habesha Steel Mills, a major rebar manufacturer and another FDI investor, Kishen Raval, described the situation as nearly a survival issue, citing, “The players that are bringing the contraband or imported material on duty free bases and selling into the market are vicious. This is extremely dangerous, and those in the legal system who uphold the nation’s legal system are in grave danger.”
“However, you should like this needs to be addressed by the government so that industry can have the confidence to further invest,” the head of Habesha Steel Mills continued, noting that the industry is still expanding, “There is more work to be done, and the future holds many opportunities.”
“The majority of the steel industry, including us, pays high taxes and is consistently recognized by the government as a gold or platinum taxpayer. But given the current circumstances, it is really difficult to carry on; the industry is being harmed by all these importers who are bringing in illegal goods or who have extremely low customs levy rates,” he elaborated.
“We understand they are only able to compete because they are bypassing the rule of law,” he cited, adding, “As an industry, we are really significant employers, directly employing over 25,000 people and indirectly employing over 100,000 people. As a result, this has to be addressed so that, once it is, the sector may expand even further.”
Manufacturers claimed that the unlawful activities primarily employing the Dire Dawa Customs office is putting their factories on the verge of shut down.
As Solomon stated, “We need swift correction else the crisis would not be corrected right away and the harm would not stop at industries but would instead affect the whole country’s economic and financial sector.”
During the discussion, a representative from the Ministry of Revenue stated that his office is eager to work with industry participants to address their issues.
Capital has acquired many invoices issued for buyers from Djiboutian vendors and customs papers. According to the customs declarations issued at the Dire Dawa branch, the customs duty levied on steel imports is nearly insignificant when compared to legitimately imported goods.
The industry players stated that the government’s various initiatives have brought about the majority of the sector’s enormous investment, but the present state of affairs has caused some to leave the nation and discouraged others from making investments in Ethiopia.
Even though there is only a two million metric ton local demand for all forms of material, the sector has set itself up to produce ten million metric tons of steel products yearly.
Still, the industry can only accommodate roughly 20 percent of its production capacity because of the absence of ample foreign currency.
Members urged the government to support the industry with a range of policy instruments, including a complete ban on the import of completed steel products and duty-free incentives.
They stated that, although importing steel items like rebar had been banned for a while under the previous Prime Minister’s administration, the ban had been lifted a few years prior without sufficient reason.
The association has 76 members.